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Hyflux

How Hyflux made a big splash in water industry

HYFLUX is one of Singapore’s most uplifting success stories, a one-woman start-up turned multinational firm that provides clean water for markets around the world.

But founder and chief executive Olivia Lum would be the first to tell you that this success was hard fought.

“Nobody who starts a business anticipates how difficult it will be,” she said.

“When you start off as a small company you are not well-recognised, because you have no brand and Singapore is a mature and competitive market.”

In fact, Hyflux began its journey of internationalisation because it was a matter of survival, she added.

“Singapore customers, when they saw that my office address was not very sexy, in Tampines Industrial Park, they knew that I was a small firm and practically nobody believed in me,” she said.

“I thought, if I was able to satisfy Singapore’s need for water, then I could satisfy any country that needs water. So I looked at the map of the world and asked myself, which region in the world faces a shortage of water? - Hyflux founder and chief executive Olivia Lum”

“One solution, I thought, was to go to Malaysia, because with my Singapore address, Malaysian customers won’t know how big or small I was.”

So Ms Lum began venturing into the Johor Baru market.

“I didn’t want to venture beyond JB because anything farther than Johor meant flying, and airfare is expensive, and you have to consider such things as a start-up,” she said.

“Johor is not a high-end market but at least it gets you going.”

Even then, it was a tough journey. Ms Lum spent each day making cold calls, travelling up and down the Causeway by motorcycle – she had sold her car and house to fund her start-up – and knocked on many doors to sell her water filtration system.

After a few years of doing this, she felt that she had gained enough experience and could grow the company further by venturing into another market.

“I went around the whole of South-east Asia and everywhere was just as competitive as Singapore, because between 1990 and 1995, most Asean countries were booming, so I decided that maybe I should venture farther,” she said.

Ms Lum eventually decided on China, reckoning that she could gain a foothold in the market as she could speak the language, and set up an office in Shanghai in 1993.

But China, too, was a very difficult market to break into.

“It was a very raw market. Rules were not transparent in those days,” she recalled.

“I still remember that every day we had to ask our staff to go to the notice board of the local government bureau to see what the changes were that particular day. New rules or any changes to existing rules were not announced in the newspapers or anywhere else, you had to go to the government offices to find out.”

Singapore's first desalination plant - the $200 million
SingSpring plant at Tuas - was built by a Hyflux consortium
in PUB's first public-private partnership project.

Despite her language skills, Ms Lum also came to learn that there was a big cultural divide that made it difficult for her to communicate effectively with her potential customers and to close deals.

“In China, there are meanings hidden behind every sentence. They say things in different ways and they mean different things. In their culture they would also not say no to your face even if they mean no,” she said.

“So sometimes you might wonder, ‘But he promised me he would buy it and he didn’t say no, so why am I still trying and trying and the deal is not being done?’”

Such difficulties and uncertainties led many businesses to give up on the Chinese market in those days, Ms Lum said.

“We almost bankrupted the company in the first two years of being in China,” she recounted.

“But I told myself that we just had to persevere, that China was too big to ignore, and since I was already there and had wetted my feet, I might as well soak myself in it and learn how to walk.”

Her instincts turned out to be right on the money.

By its third year in China, Hyflux had gained enough traction to staunch the bleeding. That was also around the time that more multinational companies began investing in the market, and some of them became Hyflux customers.

Soon after, in 1997, South-east Asia was embroiled in a financial crisis and many water treatment companies in Singapore and the region suffered heavy losses or had to be wound up altogether.

This was Hyflux’s time to return home and shine.

“Because of the circumstances, the financial crisis that set my competitors back a bit, I took the opportunity to run ahead,” Ms Lum said.

“You might have an opportunity, maybe a contact who is bringing in some business for you, but it might not be sustainable,” she said. Are you among the top three firms among your peers in that market? If you are not, how are you going to chart a path to attain that position? Because otherwise you will always be a follower and in a crisis you would have to fold.”

“After 1997, I decided to come back to relook the Singapore market after having established myself in Shanghai...”

When the Singapore Government decided to launch a tender to build the country’s first seawater desalination plant, Hyflux competed for the bid and won. It was the world’s first plant to use membrane technology to desalinate seawater.

Hyflux had finally found the success at home that it was craving at the start, but this only fuelled Ms Lum’s ambitions to venture back out into the world.

The answer was the Middle East and North Africa. Not only was this region covered in desert and naturally barren of water, it was also still using energy-intensive technology to clean its water.

Hyflux moved in and soon won a contract to build a water desalination plant in Algeria, the biggest in the world.

Since then, Hyflux has moved from strength to strength in the Middle East and North Africa, and has also started taking small steps into South America.

The firm has also set its sights on India.

“If we can cover China, India, the Middle East, Africa and South-east Asia, we would have covered almost the whole world,” Ms Lum quipped.

While Hyflux has found great success through internationalising early, Ms Lum noted that it is important for companies to not only know the foreign market but also understand their own products well before they venture abroad.

“You might have an opportunity, maybe a contact who is bringing in some business for you, but it might not be sustainable,” she said.

“Are you among the top three firms among your peers in that market? If you are not, how are you going to chart a path to attain that position?

“Because otherwise you will always be a follower and in a crisis you would have to fold.”